Professional Documents
Culture Documents
Distribution Management & Marketing Mix (PDFDrive)
Distribution Management & Marketing Mix (PDFDrive)
Marketing Mix
Sales and Distribution Management
The Marketing Mix
Product
Price
Promotion
Place
Distribution channels help in the ‘place’ aspect of the
marketing mix
Distribution provides place, time and possession utility to
the consumer
Example
Consumer wants to buy a tube of toothpaste
Made available at a retail outlet close to her residence –
place
Made available at 8 pm on a Tuesday evening when she
wants it – time
She can pay for the toothpaste and take it away –
possession
The company distribution function has made all
this possible.
The situation would be similar if a customer wants
to buy a refrigerator or medicines or even an
electric motor
Players Involved
The company and its distribution network
Direct company to consumer
Company to a C&FA / distribution center to
distributors to retailers
Distributor to wholesaler to retailer
Agent/middleman
Distributor Distributor
Wholesaler
FORWARD
Goods and Services
Customers
Company
BACKWARD
Payment for goods / returns
BOTH WAYS
Information
The Five Channel Flows
1. Physical flow of goods
2. Title flow of goods (negotiation, ownership and risk
sharing also)
3. Payment flows (financing and payment)
4. Information flow (about goods, orders placed and
orders executed)
5. Promotion flows
Channel Flows
Some channel member/s have to perform them
There is a cost associated with each flow
If a channel member is discontinued, the flow has to
be performed by another
All flows and transactions can be effective only with
timely, accurate and correct information
The channel flow is ideally to be handled by the most
competent channel member who can deliver best
service at the lowest cost.
Direct Distribution
Company to consumers or retailers without use of
intermediaries. Also includes reaching Institutional
buyers.
Selling on the Internet
If products are technically complex, this system is
preferred
Cost is a major consideration to adopt this mode
Direct Distribution - Examples
Banking services
Credit cards
Petrol / diesel – company own outlets
Land line phone connections
Health services
Utilities – electricity, water
Subsidized ration
Education
Indirect Distribution
Goods may move through a set of intermediaries
Most FMCG companies follow this route
The intermediary has a far better reach than the company
The cost of operations of an intermediary like a
wholesaler / retailer is shared with many businesses.
Role of Intermediaries
Intermediary
Wholesaler
Retailer Retailer
US Bureau of Census
Delivering Value
Keep goods accessible to customers instantly
At times, get together to bargain for better
terms
Pass on benefits or incentives to their
customers
Have a wide trading area
Difference with Retailers
Not too worried about location, ambience or
promotions – prefer to be in the main market
Deal with other businessmen and not consumers
Deal with a specific group of products only
Much larger trading area
Much larger transactions with suppliers and
customers
Believe in low margins but high volumes.
Functions of Wholesalers
Varies in degree between free-lance, company
distributors and stockists / agents
Sales and promotion of chosen company products
Buying the assortment of goods
Breaking bulk to suit customer requirements
Storage and protection of goods till sold
Functions of Wholesalers
Grading and packing of commodities
Transportation of goods to customers
Financing the buying of customers
Bearing the risks associated with the business
Collecting and disseminating market information to both
suppliers and customers
Types of Wholesalers
Full service: stocking, selling, offering credit, delivery
and business assistance (company distributors,
wholesale merchants)
Limited service: range of service is limited (examples
include Metro C&C, mail order)
Merchant w/s: independent businesses
Brokers and agents: bring buyer and seller together –
do not take possession of goods
Others: agri business, auction companies etc
Limitations of Wholesalers
Some of them do not give complete information to
suppliers for selfish reasons
Cannot be relied on to do equitable distribution
At times, do not want company and customers to
meet
Tend to hoard goods and influence pricing
Consumers have no say in pricing or quality in a w/s
dominated system
Major Wholesaling Decisions
Which markets to operate in
Manpower to employ
What products to sell
Pricing decisions / Promotional support
Credit and collections
Image and customer perception
Warehouse location and design
Inventory Control
Favourable Factors
Companies have limitations in market / outlet
coverage. Wholesalers are required to fill the gaps
Hundreds of small companies who cannot afford to
set up distribution networks – need to depend on
wholesalers
In food grains, fruits and vegetables – hardly any
organised distribution network. Wholesalers help
move goods from farm gate to consumers
Favorable Factors
Big companies also need wholesalers to get big volumes
W/s extend credit to customers. Companies cannot
match this
Retailers have to visit w/s markets to buy food grains,
cereals and pulses – buy a lot more.
Unfavorable Factors
Companies coverage focus on retailers and institutions
through their distributors
Using modern retail formats as wholesalers
More outlets like Metro C&C being encouraged
Enforcing strict price control so that w/s do not sell below
company prices.
Distributor
Is a wholesaler nominated by a company to
exclusively re-distribute the company products to its
customers in a designated territory. He does not deal
in competitor’s products. Does not sell from his
premises. Extends credit selectively.
A redistribution stockist for HLL
A distributor for Philips lighting division
A distributor for L&T engineering division
Dealer
Role similar to a distributor but
May not have a clearly defined territory and may sell both in
the market and from his shop
May deal with competitive products also
Extends credit selectively.
Dealers in industrial products may have better defined roles.
Examples:
Dealer for an edible oil company
A dealer for garment brands
Stockist
May be working for a company with a designated
territory but does not re-distribute the stocks. Sells from
his premises. Extends credit selectively.
A stockist for paper products
A stockist for automobile spares
Re-distribution is visiting customer premises to sell
products
Managing Distributors
The principles are similar across industry verticals. FMCG
is the most complex.
Has the capacity to maximize sales and market shares.
Has to ensure buying goods from the company and re-
distribution to the trade
Managing Distributors
Distributor responsibilities include:
Buying adequate quantities by Stock Keeping Unit (SKU) for
redistribution
Ensuring full market coverage of all customers in the territory
assigned to him
Help finance the operations – pays for the goods upfront but
extends credit to his customers
Maintaining inventory of company products adequate at all
times to service the market
Assist company in its promotional efforts
Need for Distributors
Under three circumstances:
For entering a new town
For additional coverage in the same town
For replacing an existing distributor
For entering a new town, assess the potential for
business to decide:
If the town can sustain a full fledged distributor
The number of distributors required
Starts with a town profile of potential, number of
customers to be serviced and the competition.
Cost of Servicing
Cost benefit of using distributors to be assessed
Logistics cost of serving the market
The number of customers to be covered by category –
wholesalers, retailers, institutions
Frequency of visits to markets and outlets
Sales revenue estimate from each visit
Markets to be covered with ready stocks or order booking
for later delivery
Likely collections during each visit – gives an idea of the
credit requirements
Expectations from a Distributor
To be stated at the start of the relationship
Helps get the right kind of distributor also
Achieving sales targets – volume, value and packs
Financial commitment on inventory and credit
Investment in infrastructure – space, vehicles
Manpower – front line and back office
Distribution effort – market and outlet coverage as per a
beat plan with productive calls
Developing new markets and new accounts
Managing key accounts and institutional business
Expectations from a Distributor
Merchandising and displays in the market
Secondary sales efforts and tracking – critical for fmcg
and pharma (secondary sales is sales from the
distributor to the outlets in the market)
Effectively handling promotions and schemes
initiated by the company
Managing damaged stocks
Expectations from a Distributor
Organising and participation in promotional events
Assist company in making a success of launching new
products and packs
Handling consumer quality complaints
Handling statutory requirements on behalf of the
company
Payments and remittances promptly to the company
Retailing
Sales and Distribution Management
What is Retailing?
Any business entity selling to consumers directly is
retailing – in a shop, in person, by mail, on the
internet, telephone or a vending machine
Retail also has a life cycle – newer forms of retail
come to replace the older ones – the corner grocer
may change to a supermarket
Includes all activities involved in selling or renting
products or services to consumers for their home or
personal consumption
Retailing
Term retail derived from French word ‘retaillier’ meaning
‘to break bulk’
Characteristics:
Order sizes tend to be small but many
Caters to a wide variety of customers. Keeps a large assortment
of goods
Lot of buying in the outlet is ‘impulse’- inventory management is
critical
Selling personnel and displays are important elements of the
selling process
Strengths in ‘availability’ and ‘visibility’
Targeted customer mix decides the marketing mix of the retailer
Retailing
Retail stores are independent of the producers – not
attached to any of them
A survey shows that only 35% of purchases are pre-
planned.
The rest are ‘impulse’- greatly influenced by quality of
the merchandising efforts
Functions of Retailers
Marketing functions to provide consumers a wide variety
Helps create time, place and possession utilities
May add form utility (alteration of a trouser bought by a
customer)
Helps create an ‘image’ for the products he sells
Functions of Retailers
Add value through:
Additional services – extended store timings, credit, home
delivery
Personnel to identify and solve customer problems
Location in a bazaar to facilitate comparison shopping
How do Customers Decide on a Retailer?
Price
Location
Product selection
Fairness in dealings
Friendly sales people
Specialized services provided
Kinds of Retailers
Type of Characteristics
retailer
Specialty store Narrow product line with deep assortment – apparel,
furniture, books
Department Several product line in different departments – Shoppers
store Stop, Big Bazaar
Supermarket Large, low-cost, low-margin, high volume, self-service
operation with a wide offering
Convenience Small stores in residential areas, open long hours all days of
store the week – limited variety of fast moving products like
groceries, food
Discount store Standard merchandise sold at lower prices for low margins -
Subhiksha
Kinds of Retailers
Type of Characteristics
retailer
Corporate More outlets owned and controlled by one firm – Globus
chains
Voluntary chain Wholesaler sponsored group of independent retailers
Segmentation
Positioning
Focus
Development
Segmentation
Putting customers in similar clusters based on their
needs
Doctors who prescribe medicines
Chemists who dispense medicines
Hospitals and nursing homes who use them
Each segment has a different need to be serviced by
the channel
Gives an idea to the sales manager as to the kind of
channel members he should be planning for.
Positioning
Defines the channel element required to service each
of the segments
The sales manager decides the channel partner who is
‘ideal’ to meet the expectations of the segments.
The number of each category of intermediary is also decided
based on the number of customers to be serviced in each
segment.
The service objectives and flows for each channel partner
are also frozen
Focus
It may not be possible to meet the needs of all segments
– cost and practicality considerations (the managerial
talent available for instance)
The sales manager has to firmly decide which of the
segments he will service
The competitive scenario also helps in this decision
Development
At this stage the channel system is being put in place
to achieve the objectives
Select the best of the alternatives
Comparison with the most successful competitor could be a
good benchmark
Channel partners of competitors may be willing to
share best practices of their principals
For modifying an existing channel, the gap between
the ideal and the existing is to be identified for
remedial action.
Channel Objectives
Defines what the channel system is supposed to do to
support customer service.
Customer needs could include:
Lot size convenience
Minimum waiting time
Variety and assortment
Place utility
The product characteristics and the market profile
also impact the objectives.
Competition could also affect the objectives
Channel Alternatives
Are planned after deciding the customer segments to
be serviced and the levels of service
Business intermediaries currently available like C&FAs,
distributors, dealers, agents wholesalers and retailers.
The number and type of intermediaries required
Developing new channel types
Roles of each channel member
Evaluation of Major Alternatives
Cost of operations
Ability to manage
and control
Adaptability
Range and volume
to be handled
Evaluation Critieria
Cost:
If existing sales force can be expanded cost effectively, this is
the best alternative
Cost of alternatives at different volumes can only be
estimated for comparison
System with the lowest cost is preferred
Adaptability – the channel should be flexible to
handle different types of markets and changes in the
market conditions
Volume and range to be handled – Capable even
when business grows or expands
Evaluation Criteria
Ability to manage and control:
Distribution network being an extended arm of the company,
the channel partners have some obligations
Operating guidelines specify these rules
The channel system should help the company enforce these
rules fairly to all channel partners
Some of the operating rules are……
Company trains channel personnel and provides proper
product literature
Selecting Channel Partners
Getting good channel partners is a difficult part of
doing business
Some of the methods employed to select channel
partners are:
Sales people identify prospects and talk to them
Press advertising (industrial goods)
Existing channel partners can give good references
Competitors’ channel members for reference, not poaching
Selection Criteria
Qualitative: willingness, confidence in company products,
willingness to abide by company rules, building company
image, innovativeness etc
Quantitative: financial status, infrastructure, location,
present businesses, customer relationships, market
standing etc
Training Channel Members
Starts from the time of recruitment
Channel member owner and his staff
Market views channel member as part of the
company – he has to behave in a like manner – hence
training assumes significance
Training could be on the job field training or
classroom training
Training is an ongoing process.
Subjects for Training
Field training on how the markets are to be worked to
achieve sales, collect payments and ensure the right
kind of merchandising
Class room training on company products,
competition and how to tackle it to gain market
shares
Special meetings for new product launches
Submitting reports and maintaining records
Statutory compliance
Subjects for Training
Care of company products
Technical specifications and answering FAQs of
customers
For technical and industrial products – recognition of
specs, installation procedure, repair and maintenance
and effective demonstrations
Servicing of automobiles and other engineering
products
Motivating Channel Members
Ambitious volume and growth targets – continuous
motivation required to achieve
Motivation includes:
Capacity building programs
Training
Promotions support
Marketing research support
Working with company personnel
Incentives
“Power” of Motivation
Reward – positive support
Coercion- threat of punitive action
Referent – positive effects of association
Legitimate – enforcing a contract
Expert – support of special knowledge
Support – additional benefits for performers
Competition – pitting against peers
French & Raven
Channel Members Evaluation
Effectiveness of the distribution channel determines
the success of the company
Company would like its channel partners to perform
at the highest standards possible
Need to constantly evaluate performance on sales
targets, coverage, productivity, inventory holdings,
attending to servicing requests etc
ROI as a Measure
Leading FMCG companies feel that an ROI of 30% for
a distributor is healthy and is a fair indication that he
is performing well.
If the ROI is more, additional tasks are given
If the ROI is less, the company may provide additional
support
Post evaluation tasks include counseling, retraining
and motivating. In extreme cases it may result in
termination.
Performance Evaluation
On pre-agreed tasks only. No surprises.
Specific targets on periodical basis are set.
Targets on volume and outlet productivity could be for a
week or a month
Targets relating to increasing market shares or total outlet
coverage could be for 6 months
Different weightages could be given for each of the
parameters for evaluation
The performance appraisal is open and transparent
Steps for Modifying Networks
Service level desired and willing to deliver
Activities required to deliver service level, who will do
it and at what cost
Derive ideal channel structure and compare with
existing to know gaps by evaluating based on
standard parameters relating to effectiveness and
efficiency
Action to bridge the gaps and put modified channel
system into place
Define key performance indicators
Channel Comparison Factors
Efficiency
Effectiveness
Scalability
Flexibility
Consistency
Reliability
Integrity
Non-store Retailing
Selling door-to-door
Vending machines
Tele-shopping networks
Selling through catalogs
Other forms of direct selling
Electronic channels
Retailing on the Internet
Unlimited assortment
Items may not be on hold
No product touch or feel
More information makes the customer a better
shopper
Comparison shopping possible
Consumer has to plan purchases ahead
No need to handle cash – payment can be on-line
Shopping is 24X7
Vertical Integration
This means owning the channel. The company does the
work of production, branding and distribution.
Downstream integration means the producer of the
goods also does the distribution – Eureka Forbes, Bata
Vertical Integration
Upstream integration means the seller also produces the
goods – private labels of modern retailers.
If the organization does the work of production, branding
and distribution, it is said to be vertically integrated.
Vertical Integration provides better control over the
distribution function
Outsourcing Distribution
Is the most prevalent situation as:
The ‘reach’ is better
The cost may be lower
The company can exploit the ‘core competence’ of its
channel partners, which is distribution
Vertical integration is a choice which will become
long term and cannot be easily changed once the
resources have been committed.
However, direct distribution (owning the channel) is
still the best solution for ‘intensive’ distribution.
Channel (Conflict) Management
PERCEIVED
MANIFEST
LATENT
FELT
Types of Conflicts
Latent Conflict:
Some amount of discord exists but does not affect the
working or delivery of customer service objectives.
Disagreement could be on roles, expectations, perceptions,
communication.
Perceived Conflict:
Discords become noticeable – channel partners are aware of
the opposition.
Channel members take the situation in their stride and go
about their normal business
No cause for worry but the opposition has to be recognized
Types of Conflicts
Felt Conflict:
Reaching the stage of worry, concern and alarm. Also known as
‘affective’ conflict.
Parties are trying to outsmart each other.
Causes could be economical or personal
Needs to be managed effectively and not allowed to escalate.
Manifest Conflict:
Reflects open antagonistic behavior of channel partners.
Confrontation results.
Initiatives taken are openly opposed affecting the performance of
the channel system.
May require outside intervention to resolve
Root Causes for Channel Conflict
Roles not defined properly
Allocation of scarce resources between members seem unfair
to some
Differences in perception of the business environment
Future expectations not likely to materialize
Decision domain disagreements – who has to decide on what
(key account pricing)
Channel members do not agree on objectives
Misunderstanding or misinterpretation of routine business
communication
Resolving Conflicts
Accommodation
Compromise
Collaboration
Kenneth W Thomas
Avoidance
Used by weak channel members.
Problem is postponed or discussion avoided.
Relationships are not of much importance.
As there is no serious effort on getting anything done,
conflict is avoided.
Aggression
Also known as a competitive or selfish style.
It means being concerned about one’s own goals
without any thought for the others.
The dominating channel partner (may be the
principal) dictates terms to the others. Long term
could be detrimental to the system.
Accommodation
A situation of complete surrender.
One party helps the other achieve its goals without
being worried about its own goals.
Emphasis is on full co-operation and flexibility in
approach. May generate matching feelings in the
receiver.
If not handled properly, can result in exploitation
Compromise
Obviously both sides have to give up something to meet
mid way.
Can only work with small and not so serious conflicts.
Used often in the earlier two stages.
Collaboration
Also known as a problem solving approach
Tries to maximize the benefit to both parties while
solving the dispute.
Most ideal style of conflict resolution – a win-win
approach
Requires a lot of time and effort to succeed.
Sensitive information may have to be shared
Channel Policies
Defines how the channel is required to operate.
Normally framed by the channel principal to guide
the operations of the channel system
If not framed properly could prove the starting point
of channel conflicts.
Some subjects of channel policies could be as seen in
the next slide:
Channel Policies
Markets to be covered
Customer coverage
Pricing
Product portfolio to be handled
Selection, termination of channel members
Ownership of the channel
The Services Sector
Twice the size of the manufacturing sector
Services offered are to be in line with customer
demand
Services have to be presented in an appealing
manner to sustain customers.
Needs specialized channels which understand the
characteristics of service delivery
5 Characteristics of Services
They are intangible – can only be felt. No visual
features like size, style.
They are inseparable from their service providers – a
3P cannot deliver
They cannot be standardized – custom made and
delivered
Customers are involved to a great degree – define the
services
They are perishable – cannot be stored for delivery
later. Salvage value of an unsold service is zero.
Channels Used
Shorter channels than for products
Some channels used are:
Direct from service provider to user
Agents or brokers to bring buyer and seller together
Franchisees or contractors
Electronic channels
High degree of customization is provided
Channel Information Systems
COLLECTION
PROCESSING
STORAGE
USE
Information Process
Collection: acquiring and placing raw data – monthly
sales by each territory
Processing: analyzing data to get meaning out of it –
arranging, modifying and interpreting the data by the
user – comparison of sales between periods
Storage: keeping the information intact till it is
needed
Use: application of information for management
decision making – sales data of the last 6 months to
forecast the sales of the next month.
Developing a Channel MIS
Marketing
Outbound
Inbound
Logistics
Logistics
Service
& Sales
Primary Activities
Logistics Plan Outline
Internal analysis (current position)
Organization
Human resources
Transportation
Relations with internal customers
Quality of product
Quality of Service
External / situation analysis
Competitor logistics performance
Trends
External environment / economy
Public, private and contract warehouse
Public, private and contract carriage
Principles of Logistics Excellence
Strategic Operational
Link logistics to corporate Focus on financial
strategy performance
Organize comprehensively Target optimum service levels
Use the power of Manage the details
information Leveraging logistics volumes
Emphasize human resources Measure and react to
Form strategic alliances performance
Receive goods
Identify goods
Sort goods Temporary Permanent
Dispatch to storage
Hold inventory
Recall, select goods
Marshal the shipment
Dispatch the shipment
Prepare records and advices
Purpose of Warehousing
To provide desired level of customer service at the
lowest possible total cost
It is that part of the firm’s logistics system that stores
products (RM, Packing Materials, WIP, FG) at and
between point of origin and point of consumption
and provides info to management on the status,
condition and disposition of items being stored
Distribution warehousing relates mainly to FG
Reasons for Warehousing
Service related Cost related
Maintain source of supply Achieve production economies
Support customer service policies Achieve transportation economies
Meet changing market conditions Take advantage of Quantity
Overcome time and space Purchase discounts and forward
differentials buys
Support JIT programs of suppliers Least Logistics cost for a desired
and customers level of customer service
Provide customers with the right
mix of products at all times
Temporary storage of materials to
be disposed or re-cycled
Warehouses
Support manufacturing
Mix products from multiple facilities for shipment to a
single customer
Break-bulk
Aggregate
Used more as a ‘flow-thru’ point than as a ‘hoarding’
point
Distribution Warehousing
The objective is to set up a network of warehouses
closest to the customer locations to service markets
better and minimise cost
Could be C&FA s, depots or distribution centers
Macro location strategies:
Market positioned
Production positioned
Intermediately positioned
Distribution Center
Warehouse designed to speed the flow of goods and
avoid unnecessary costs
Speeds bulk-breaking to avoid inventory carrying costs
Helps to centralise control and co-ordination of logistics
activities
Products can also be cross-docked (one vehicle to
another)
Market Positioned
Warehouses located nearest to the final customer
Factors influencing are:
Order cycle time
Transportation costs
Sensitivity of the product
Order size
Levels of customer service offered
Production Positioned
Warehouses located close to the production facilities
or supply sources
Not the same level of customer service as the earlier
one
Serve as points of aggregation / collection for
products made in a number of plants
Factors influencing are:
Perishability of raw materials
Number of products in the product mix
Assortments ordered by customers
Transport consolidation rates ex; FTL
Intermediate Positioned
Mid point locations between the final customer and
the producer
High customer service levels possible even if products
made in number of units
Other macro approaches look at cost minimisation or
cost and demand elements to maximise profitability
Transportation
Very important in the Logistics function:
Movement across space or distance adds value to products
Transportation provides time and place utility
Role of transportation includes:
Provides opportunity for growth under competitive
conditions
Deeper penetration into markets
Wider distribution means greater demand
Can influence product prices favourably
Transportation Principles
Continuous flow
Optimise unit of cargo - stackability
Maximum vehicle unit – capacity utilization
Adaptation of vehicle unit to volume and nature of
traffic
Standardisation
Compatibility of unit load equipment
Minimum of dead weight to total weight
Maximum utilization of capital, equipment and
personnel
The Selection Criteria
Environmental analysis: shipper, carrier, government
regulations, public influence
Deciding objectives
Selecting mode
Select transport type within the mode
Define functions of transport
Evaluation and control – customer perception /
satisfaction, best practice benchmarking
Cost Factors
Can be product related or market related.
Product related: density, stowability, ease or difficulty
of handling and liability
Market related: competition, location of markets,
Government regulations, traffic in and out of the
market, seasonality of movements and impact on
customer service
Five prominent modes:
Road, rail, air, water and pipeline.
Sixth one is use of Ropeways
Customer Service Factors
Consistency, dependability
Transit time
Coverage – door-to-door for example
Flexibility in handling a range of products
Loss and damage performance
Additional services provided
Reverse Logistics
Movement of goods from the market or customer
back to the company
The need:
Increased awareness of the environment
Stringent legislation
For some it is part of the business
Profitability of dealing with scrap, surplus
Surplus, obsolescence can result due to:
Over optimistic sales forecasts, change in product specs,
errors in estimating material usage, losses in processing or
overbuying based on incentives
Advantages of Rail
Economy – more so for goods over long distances
Efficiency of energy
Reliability – not affected by weather conditions
Disadvantages
Uneconomical for small shipments and short distances
Not suitable for remote stations
Costly terminal handling facilities
Inflexible time schedules
Road Freight Advantages
Through movement – direct from consignor to
consignee, no transshipment
Flexibility – routes and loading routines can be easily
altered, operate day and night
Less capital costs – for own fleet + immunity from
industrial action
Fast turn-around – if articulated units like tractors
and trailers are used
Minimum delays
Disadvantages
Susceptibility to weather and road conditions – in
spite of the best protection
Unsuitability for heavy loads – rail transport more
economical for bulk loads
Unsuitability for long distances – again the rail
telescopic rates are more favourable
Air Transport Advantages
Faster mode
Reduction in cost particularly inventory
Broad service range
Increasing capabilities
Disadvantages:
High cost
Weather affects flight conditions
Limitations on heavy consignments
Water Transport
Advantages:
Mass movement of bulk
Lowest freight cost
Preferred for long haul of low value commodities
Disadvantages:
Not for quick transit
Suitable for certain types on commodities only
Pipeline Movement
Advantages:
Reliable, continuous, all weather transport
Low energy consumption – hence low cost
Low maintenance and operating costs
Underground, no space problem
Can traverse difficult terrain
Minimal transit losses
Operation round the clock, safe
Economies of scale – double the throughput for only 30%
additional cost
Disadvantage is in the investment cost
Ropeways
Advantages:
In hilly or inaccessible areas
Long and circuitous routes with streams / deep valleys
For commodities capable of movement in ropeway buckets
Short haulages of less than 50 kms
Areas where other carriers are uneconomical
Disadvantages:
Heavy investments
Limitations on size and quantity of haul
Carrier Selection
Traffic Related Shipper related Service related
Length of haul Size of firm Speed (transit time)
Consignment weight Investment priorities Reliability
Dimensions Marketing strategy Cost
Value Network of production Customer relationship
Urgency and distribution Geographical coverage
Regularity of shipment Availability of rail Accessibility
Fragility sidings Availability of special
Toxicity Stockholding policy vehicles / equipment
Perishability Management structure Monitoring of goods
Type of packing System of carrier Unitisation
evaluation Ancillary services – bulk
Special handling required
breaking, storage
Chart of Relative Merits
Parameter Weightage Rail Road Air Water Pipe Rope
line way
Speed 30 5 6 8 4 3 3
Versatility 10 6 8 5 6 3 2
Reliability 20 6 8 5 5 7 4
Availability 10 7 8 5 6 3 2
Continuity of 10 6 7 5 5 8 3
service
Distribution cost 20 4 5 6 6 7 8
Overall ranking 10 2 1 4 5 5 6
International Sales & Distribution